Interest rate of Vanguard money market

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Interest rate of Vanguard money market

Postby vchiu25 » Tue Jul 16, 2013 11:51 am

Hi Boglehead

I been keeping my cash in Vanguard money market (low 5 digit). I realize I don't really know how to interpret the interest rate. The website say it has SEC yield of 0.02% as of 07/15/2013 and expense ratio of 16%. What does that mean? Should I move my cash to a high yield saving at .85% APY?
Last edited by vchiu25 on Tue Jul 16, 2013 12:09 pm, edited 1 time in total.
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Re: Interest rate of Vanguard money market

Postby Randomize » Tue Jul 16, 2013 12:01 pm

The Prime MM fund has a yield of 0.02% so yes, you should definitely keep your money in a high yield savings account instead. The MM fund is mostly just used as a holding tank for cash in between transfers rather than as an investment vehicle.

https://personal.vanguard.com/us/funds/snapshot?FundId=0030&FundIntExt=INT
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Re: Interest rate of Vanguard money market

Postby SpringMan » Tue Jul 16, 2013 12:07 pm

Vanguard Prime MM is yielding .02%. The expense ratio is not really relevant. So yes, the high yield savings at .85% is better. The problem many have is that they are inside an IRA. It is a hassle to transfer IRA custodians from Vanguard to a bank for such small interest. Doing so might lower your Vanguard client status too. In a taxable account it is much easier to move the funds, ACH etc.
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Re: Interest rate of Vanguard money market

Postby G-Money » Tue Jul 16, 2013 1:28 pm

vchiu25 wrote:The website say it has SEC yield of 0.02% as of 07/15/2013 and expense ratio of 16%. What does that mean?

The SEC yield is net of expenses. So the securities held in the fund have a yield of about 0.18%, and after the expenses are taken out, it returns 0.02% to you.

vchiu25 wrote:Should I move my cash to a high yield saving at .85% APY?

That depends. If (1) it's a material amount of money and (2) you don't mind the added complexity of having another account at another financial institution, then yes. If only one of those applies, then maybe. If neither of those applies, then no.

FYI, there are savings accounts yielding more than 0.85%, too, if you want to go that route. http://www.depositaccounts.com/
Don't assume I know what I'm talking about.
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Re: Interest rate of Vanguard money market

Postby EmergDoc » Tue Jul 16, 2013 10:40 pm

I wrote this article about 26 months ago entitled:

"Why would anyone invest in a money market fund?"

http://whitecoatinvestor.com/why-would- ... rket-fund/

Rates haven't changed since. Don't feel too badly, you haven't lost out on much since even the best bank accounts are paying less than 1%.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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Re: Interest rate of Vanguard money market

Postby Phineas J. Whoopee » Wed Jul 17, 2013 1:33 pm

Good article, EmergDoc. Good points well written. I do have concerns, which are not due to changes between the posting date and now, but I'll take them to PM.
PJW
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Re: Interest rate of Vanguard money market

Postby vbdoug » Wed Jul 17, 2013 7:01 pm

I have most of my short-term reserves locked up in a five year c/d with a credit union that will mature in about 3 1/2 years. The rest of it in the Vanguard Prime Money Market Fund and I also have some investments in the Vanguard GNMA Fund. I like the idea of keeping some short-term reserves with Vanguard for use as a sweep account. Any suggestions as to what I should do to maximize my returns and still keep these funds with Vanguard?
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Re: Interest rate of Vanguard money market

Postby dm200 » Wed Jul 17, 2013 10:23 pm

vbdoug wrote:I have most of my short-term reserves locked up in a five year c/d with a credit union that will mature in about 3 1/2 years. The rest of it in the Vanguard Prime Money Market Fund and I also have some investments in the Vanguard GNMA Fund. I like the idea of keeping some short-term reserves with Vanguard for use as a sweep account. Any suggestions as to what I should do to maximize my returns and still keep these funds with Vanguard?


That depends, in part, on how much you are talking about. Three month brokered CDs at Vanguard are available now at 0.35% and usually, but not right now, one month brokered CDs are available at much more then the MM is paying. I think the minimum for a Vanguard brokered CD is $10,000. Of course, going our further with Vanguard brokered CDs will provide a higher rate. Short tem bond funds may work, but those rates are low as well.
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Re: Interest rate of Vanguard money market

Postby G-Money » Thu Jul 18, 2013 9:08 am

dm200 wrote:I think the minimum for a Vanguard brokered CD is $10,000.

I believe that's oly for new issue CDs at VBS. Existing issues purchased on the secondary market can be purchased in $1,000 increments (although it costs $2 per buy/$0 per sale, which may make secondary market CDs for such a short period not worthwhile).
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Re: Interest rate of Vanguard money market

Postby vbdoug » Thu Jul 18, 2013 6:17 pm

I just got off the phone with Vanguard and everything dm200 states is fact. The Vanguard rep added that while one month CD's are not available today they might will be offered tomorrow. He confirmed that the best rate on a 3 month CD was .35% today and speculated that the one month CD tomorrow {if offered} would pay about half as much interest. That is still a lot more than the Prime Money fund but it still very little. If my math is correct that means a 10K one month CD would make about $17.50 less taxes on a yearly basis. The search for a free lunch continues.
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Re: Interest rate of Vanguard money market

Postby vbdoug » Wed Jul 24, 2013 2:13 am

In my original post my primary concern was getting a little more interest than what the Vanguard Prime Money Fund paid. And for that relatively small amount I do not think that effort would be worth my time. However, I have accumulated a large amount of VFSUX {Short-term Corporate bonds} that comprises 17% of my portfolio. I have read that that fund took a 10% dive in the last recession. At this point of my life {in blessed retirement} I don't need much more, but I don't need to take unnecessary risk. For that reason I am going to take a good chunk of my VFSUX and utilize the Vanguard 3 month CD's now and in a month or so. I think that works for me. BTW, if you read some of the earlier posts, Vanguard today {Tuesday} did offer a one month CD with an interest rate of .15%. The three month {I believe} is .35%. Not much, but better than -10%.
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Re: Interest rate of Vanguard money market

Postby vbdoug » Tue Oct 08, 2013 8:54 pm

This is a response to my previous comment made in July of 2013. So I purchased a 3 month CD using Vanguard with a rate of @ .35% that is going to mature in a couple of weeks. The current rate is still .35% for a renewed CD. I just received a post card from Opus Bank [bricks and mortar and local} offering an "Encore Personal Money Market" rate of 1.05%. I went to their web site and could not find that offer so I called them up. They said it was only good for local markets and they did not want to "confuse" their customers. I want to be aware of what negative things I should look out far. Rates can change but the banker said recent changes have been minimal {and I can always withdraw the money}. With a $1,000.00 deposit there are not any fees. In fact, they said there would not be any fees of any kind. Positives are of course the higher rate and I can withdraw it any time I wish to do so. I would like to keep my money in the Vanguard family but I do not want to be foolish. My question is: Are there any other negatives I should be looking out for?
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